The Left is not always right

On May 26, 2005, the Union Cabinet approved a proposal to sell off 10 per cent equity in the profit-making public sector unit -- Bharat Heavy Electricals Limited.

Newspaper reports suggest that the ministry of finance has also proposed to sell a 20 per cent stake in National Aluminum Company Ltd and a 15 per cent stake in Shipping Corporation of India Ltd.

The residual stake in Maruti Udyog Ltd of around 8 per cent might also be sold. The government is planning to raise Rs 10,000 crore (Rs 100 billion) through this round of divestment.

The irony of the situation being, after closing down the department of divestment and much maligning arguably the previous government's most competent minister, the government is back to doing the same as it's predecessor.

The cash-strapped government needs money and this probably is the easiest way to get it, though this time around the method of going about it is a little different.

Instead of divesting through the strategic sales route (where the government's stake in the company was sold to a single buyer who was willing to pay a control premium) the government will divest 10 per cent of BHEL's equity through a public offer.

The divestment ministry in the previous government, under the then divestment minister Arun Shourie and the then divestment secretary Pradeep Baijal, had managed to sell off Rs 900 crore (Rs 9 billion) worth of government equity in PSUs, through the strategic sales route, for a whooping Rs 11,000 crore (Rs 110 billion).

The proceeds of the divestment were taken as source of funds in the annual budget statement of the government of India and this helped lower the fiscal deficit. This time around the proceeds will be passed onto the National Investment Fund. NIF will be used to meet the social sector expenses of the government.

As expected the Left Front (the Left Front consists of the Communist Party of India-Marxist, the Communist Party of India, the All India Forward Bloc and the Revolutionary Socialist Party) has been critical of this decision of the government.

When the decision to allow up to 74 per cent foreign direct investment in the telecom sector was made at the same time, to appease the Left Front, the rate of interest on investment into the Employees Provident Fund was increased to 9.5 per cent.

It remains to be seen is what the government does this time around. With the United Progressive Alliance at the Centre dependent on the Left Front's support to have a majority in the Lok Sabha, the Left Front with its 61 members, never really had it so good: all the power with absolutely no responsibility.

So any economic reform that the government wants to make first needs clearance from the Left Front and only then can it go ahead with it.

The question

As soon as UPA assumed power one of the first things it did was to do away with the department of divestment. This was not enough to please the Left Front and since then they have opposed almost each economic reform that the Congress-led UPA government has tried to go ahead with.

From increasing the foreign direct investment limits in banking, insurance and telecom, to allowing domestic airlines to fly on international routes to the scrapping of Press Note 18, everything has been opposed.

But the Left Front seems to be doing a Jekyll and Hyde in this case. The only reasonably big state where the Left Front is in power right now is West Bengal.

West Bengal Chief Minister Buddhadeb Bhattacharya is doing exactly the same things that the Left Front is opposing at the Centre. Bhattacharya is trying to get in foreign investment into West Bengal. He has also gone ahead and closed a few loss-making state PSUs.

His zeal for reform has led to several industrialists calling him the best chief minister in the country. Even Prime Minister Manmohan Singh hinted at the same, speaking at the CII partnership summit, hosted in Kolkata, in January this year.

The fact that Mr Bhattacharya is doing this obviously means he has the permission of his own party CPI (M) and the parties within the Left Front.

The Left Front seems to have realised that the policies followed for 23 years under the leadership of Jyoti Basu did not do the state much good. Unemployment was high, investors had fled the state, and West Bengal had developed a reputation of warring trade unions which kept new investors away.

Economic reform was the way to go. Even though the state adopted an investor friendly industrial policy in 1994, it's taken almost a decade for investors to come back. Impressions about way things work do not change overnight.

The trickle of investors is now converting into a flow. So given this why is the Left Front behaving the way it is. One way at the Centre and totally opposite in West Bengal.

The answer

Mr Bhattacharya is leading a democratically elected government in West Bengal and he obviously understands the fact that he has a state to run. And one part of progress is associated with having a vibrant industry which produces jobs which in turn produce more jobs, and so the multiplier effect works.

On the other hand, the Left Front in Delhi is run by armchair communists (Prakash Karat, SitaramYechury, etc, the poster boys of new communism, who seem to have taken off from where the old warhorse Harkishen Singh Surjeet left) who have never run any government, have practiced the 'cholbe na, cholbe na' kind of politics all their lives and so still think of themselves as being anti-establishment.

And within the Left Front these unelected leaders have as much say as the elected ones. This explains their tendency to protest against any economic reform the government tries to carry out.

Further, the Left Front can't seem to be too much hand in glove with the government on all issues. With elections in West Bengal scheduled next year there must be something for the voter to differentiate between the Congress which is its number one enemy in West Bengal and the Left Front.

Many political analysts feel the Left Front needs issues to be there on the basis of which it can withdraw support to the UPA government sometime before the elections next year. Going into the elections while supporting the Congress at the Centre would be difficult to explain to the electorate.

In closing

It's an acknowledged fact that world over communism has been confined to the dustbins of history. People have emphatically thrown out communism and gone in for democracy. India is no different. The Left Front may have 61 seats in the Lok Sabha but these seats largely come from its performance in the three states of West Bengal, Kerala and Tripura.

So if the Left Front aspires to extend its presence beyond these three states, it has to shed its archaic way of protesting against everything and support the economic reforms on a case-by-case basis.

Take the case of divestment. The proceeds of divestment will go to meet the social sector expenses of the government. The Left Front wants the government to spend on social sector programmes. But the money to be spent has to first come from somewhere. So divestment is the way to go. The sooner the Left Front realises this, the better it is, for them as well as India.

The Left Front has been known to commit historical blunders in the past. From supporting China in the 1962 war, to supporting the emergency in 1977 (a section of the Left Front, CPI, supported the emergency) to not allowing Jyoti Basu to become the prime minister of the United Front government in 1996 (which would have been the first case of a democratic country having a communist PM).

The Left's opposition to all economic reform might well turn out to be another blunder and might prevent India from catapulting into the big league.